AutoRecovery save of White Collar Crime a Form of Occupational Fraud.doc

White collar crime 26 rationalization initial red

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WHITE COLLAR CRIME 26 Rationalization Initial Red Flags The savvy accountant may catch wind of corporate shadiness if these warning signs begin to appear: 1. Problems detected by internal controls. 2. Employee complaints. 3. Problems detected by an internal auditor’s review of controls. 4. Customer or vendor complaints, such as payments not being credited to the customer’s account or contracts not received. 5. Accidental discovery of something that warrants follow-up, such as two expense reports that contain receipts for the same airline ticket. 6. Accusations from anonymous sources. 7. Unusual or unexplained financial statement trends. 8. Changes in an employee’s lifestyle that are not consistent with the employee’s salary or wages or other known sources of income. 9. Abrupt changes in an employee’s behavior that can’t be explained by other factors. 10. Problems detected in the course of an external audit, review or compilation. n fact, the annual Global Fraud Surveys conducted by PricewaterhouseCoopers have revealed a 22 percent increase in the last two years in the number of companies reporting financial fraud. Corroborating the ACFE assertions, fraud was detected by chance in more than a third of cases, and internal audit found the issues only 26 percent of the time. Almost one quarter of the
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WHITE COLLAR CRIME 27 perpetrators were senior managers – the very people signing off on financial statements. Furthermore, the types of fraud are changing, with cybercrime as the next wave. Breaking the Cycle There are many ways to make an organization more impervious to fraud, but it is important that management tries to "break" the fraud triangle by implementing specific policies and procedures in addition to developing fraud deterrence controls. Fraud Deterrence Controls: While developing a suitable fraud deterrence program is an in-depth process, there are five basic steps to those controls: Review the organization-level components of internal control and identify weak or nonexistent controls. Identify assets (and related transactions) susceptible to misappropriation. Review the organization’s systems and procedures relating to the vulnerable areas, and identify weak or missing systems and procedures. Develop controls to reduce the risk of misappropriation in the vulnerable areas. Cost/benefit relationship of the control developed. Most important is creating an ethical environment starting with a positive tone at the top and corporate-wide core values and policies to which all employees have buy-in. Secondly, organizations must reduce employees' opportunities to commit fraud. Surveillance procedure and timely preparation and review of monthly financial statements help ensure that finances are well- controlled. Policies like periodic job rotation and mandatory vacations can help boost morale.
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  • Fall '13
  • white collar, Enron Corporation

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